U.K. Stocks Advance, Led by RBS, Banks; Segro, Hammerson Gain

By Sarah Jones

Feb. 25 (Bloomberg) -- U.K. stocks advanced, led by banks on speculation Royal Bank of Scotland Group Plc may strike a deal with the government to guarantee debt and Federal Reserve Chairman Ben S. Bernanke suggested U.S. lenders may not need to be nationalized.

RBS, Britain’s biggest state-controlled bank, and Lloyds Banking Group Plc climbed more than 5 percent on reports the government will insure 500 billions ($728.9 billion) of loans and investments. Segro Plc led a rally in property shares after banks agreed to loosen the terms of $1.7 billion pounds ($2.5 billion) of loans. British Land Co. jumped 11 percent.

The FTSE 100 Index gained 48.23, or 1.3 percent, to 3,864.67 at 1:28 p.m. in London, snapping three-days of declines. A measure of bank shares jumped the most in almost a month. The FTSE All-Share Index added 1.5 percent. Ireland’s ISEQ Index rose for the first time in 12 days, climbing 3 percent.

“The U.S. market is leading us back up again today, with the main boost coming from Bernanke’s suggestion that no U.S. bank should need nationalizing,” said Martin Slaney, head of derivatives at GFT in London.

RBS jumped 5.9 percent to 23.4 pence and Lloyds, which bought HBOS Plc, increased 9.1 percent to 58.8 pence. The banks are expected to sign agreements to increase lending to small businesses and households by at least 20 billion pounds apiece in exchange for government insurance on loans and investments, the Guardian reported without saying where it got the information.

Barclays Plc, the U.K.’s third-largest bank, rose 6.6 percent to 104.7 pence. HSBC Holdings Plc, Europe’s largest bank, gained 5.1 percent to 496.25 pence.

Supervision

Federal Reserve Chairman yesterday told lawmakers the government would use supervision instead of shareholder control to guide major banks, and warned against dismantling their franchises. The remarks eased concern Treasury Secretary Timothy Geithner’s financial plan would push aside private shareholders.

Segro surged 15 percent to 100 pence after the U.K.’s largest owner of business parks agreed to pay a one-time fee and higher interest rate charges in return for banks loosening the terms of loans and borrowing facilities.

British Land, the U.K.’s second-largest real estate investment trust by market value, increased 7 percent to 431.75 pence. Land Securities Group Plc added 5.9 percent to 529.5 pence.

Hammerson Plc jumped 7.3 percent to 333.5 pence. JPMorgan Chase & Co. upgraded the U.K.’s fourth largest real estate investment trust to “overweight” from “neutral,” saying the company “could be an attractive M&A candidate in any potential industry consolidation.”

‘Signs of Life’

Barratt Developments Plc surged 11.5 pence, or 16 percent, to 83. The U.K.’s second-biggest homebuilder by volume said the pace of home sales and visitor levels have picked up, indicating there are “signs of life” in Britain’s property market.

Bellway Plc rose 52 pence, or 9.3 percent, to 611 pence, while Persimmon Plc rallied 27.25 pence, or 9.3 percent, to 321.5.

The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.

Cadbury Plc (CBRY LN) increased 13 pence, or 2.6 percent, to 521.5 after the world’s largest confectionery maker said revenue growth this year will meet the lower end of its forecast and kept its goal for higher profit margins as chocolate and gum sales defy the global recession.

Tomkins Plc (TOMK LN) gained 11 pence, or 10 percent, to 116.75 pence after the U.K. maker of auto parts and building materials announced plans to extend job cuts and move plants to lower-cost countries as it targets $150 million in annual savings by 2011.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.